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Swimming Upstream: Input-output Linkages and the Direction of Product Adoption

Author

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  • Johannes Boehm
  • Swati Dhingra
  • John Morrow

Abstract

Multiproduct firms dominate production, and their product turnover contributes substantially to aggregate growth. Firms continually adapt their product mix, but what determines which products firms expand into? Theories of the firm propose that mulitproduct firms choose to make products which need the same know-how or inputs that can't be bought 'off the shelf'. We empirically examine this rationale by testing for firm-level capabilities that are shared across products and manifested through input-output (IO) linkages. We show that a firm's idiosyncratic horizontal and vertical similarity to a product's IO structure predicts product adoption. Using product-specific policy changes for a firm's inputs and outputs, we show that input linkages are the most important, suggesting that firms' product capabilities depend more on economies of scope rather than product market complementarities.

Suggested Citation

  • Johannes Boehm & Swati Dhingra & John Morrow, 2016. "Swimming Upstream: Input-output Linkages and the Direction of Product Adoption," CEP Discussion Papers dp1407, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1407
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    Cited by:

    1. Vandenbussche, Hylke & Viegelahn, Christian, 2016. "Input Reallocation Within Firms," CEPR Discussion Papers 11395, C.E.P.R. Discussion Papers.
    2. José Liberti & Jason Sturgess & Andrew Sutherland, 2018. "Economics of Voluntary Information Sharing," Working Papers 869, Queen Mary University of London, School of Economics and Finance.
    3. Kerstin Hötte, 2021. "Skill transferability and the stability of transition pathways- A learning-based explanation for patterns of diffusion," Journal of Evolutionary Economics, Springer, vol. 31(3), pages 959-993, July.
    4. Daniel Goya, 2019. "Chinese competition and network effects on the extensive margin," Working Papers 2019-01, Escuela de Negocios y Economía, Pontificia Universidad Católica de Valparaíso.
    5. Goya, Daniel, 2021. "The network effect of Chinese competition on what domestic suppliers produce," Economic Modelling, Elsevier, vol. 102(C).

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    More about this item

    Keywords

    Multiproduct firms; product adoption; vertical linkages; horizontal linkages;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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